A Different Mindset

While long-term retirement goals can sometimes be overwhelming, steadily adding to your savings (along with investment earnings and compounding) is the only way to watch your nest egg grow. Changing your perspective on saving can make the task a bit easier to implement.

Often, we view saving money as depriving ourselves of what we want to do or what we want to have now (thanks to a strategic bombardment of consumer product advertisements). Instead of taking this view, envision yourself putting away money for things you’ll want later in life. After all, who wouldn’t rather travel the world in their later years instead of filling their days with watching game shows and strolling the aisles at the Dollar Store?! Think of saving as paying yourself instead of paying someone else for things you might not really need.

Think of Money as Work

If you still aren’t convinced, try thinking of the money you spend in terms of the time you spend working to earn the money in the first place. Let’s say you earn $60,000 a year, which represents approximately 2,000 hours on the job this year. That works out to an hourly rate of approximately $30. In this context, a fancy dinner for 2 at $120 would be the equivalent of 4 hours worked. A $4,500 vacation would require 150 hours on the job, and $1,200 in annual credit card interest would take 40 hours (one work week) to pay off.

Time Well Spent

Thinking about how long you’re willing to work to pay for things makes it easier to see the value of saving. You might decide that some of your time is better spent working towards building a financially secure future than for something you don’t really need in the first place.

Stephen Osborne
Accountant
sosborne@mo-cpa.com

Due date for calendar-year corporations to pay second installment of 2013 estimated tax.

Due date for calendar-year trusts and estates to pay second installment of 2013 estimated tax.

If you are going to be out of town this summer,

If you are planning a summer business trip, you and your spouse may be able to travel for little more than you would have paid on your own.  For example, if a double hotel room costs $250 and a single room costs $200, you can still deduct $200 as a business expense even if the two of you get the double.

Consider hiring your child for the summer.  Your son or daughter can earn up to the standard deduction amount tax-free, and you are entitled to a business deduction for the wages paid.  Even better, your child can earn up to an additional $5,000 tax-free, as long as he or she then makes a deductible IRA contribution.

If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.

If you volunteer to help a qualified charitable organization, keep track of your expenses.  You can deduct mileage or actual expenses for charitable driving, as well as your other out-of-pocket expenses, if you itemize your deductions on your income tax return.

Lisa Osborne
Office Administration
lisaosborne@mo-cpa.com

Join us today in remembering the men and women who died while serving in the United States Armed Forces.  And let’s not forget those who have served and are still serving our country and fighting for our freedoms today.  To you, we humbly say, “Thank you.”

Tax Deduction

As long as the pay is reasonable in relation to the time your child spends working and the tasks they perform, you can deduct the wages paid to them as a business expense.  But remember that you have to play by the rules.  The work must be legit and in connection with your trade or business.

Tax-Free Income for Your Child

While wages do in fact represent taxable income, in 2013, a dependent can earn up to $6,100 and pay no federal income taxes due to the standard deduction.  Additionally, if their earnings are in excess of the $6,100 threshold, the first $8,925 is only taxed at 10% for single taxpayers in 2013.  With top individual rates now reaching 39.6% your marginal rate is probably higher than your child’s, therefore the deduction for your child’s wages is likely worth much more than the amount of tax your child may owe.

The wage deduction could also save you some self-employment tax. And if your child is younger than 18 and your business is not incorporated, your child’s wages generally will not be subject to Social Security and Medicare (FICA) taxes.

Kick Start on Saving

While your child is likely prone to spend summertime wages on clothing, movies and music, opening an individual retirement account (IRA) could be a great way for him or her to start saving and will let the power  of tax-deferred compounding do its thing.  As much as $5,000 of their earnings could be contributed in 2013 to the account.  Contributions to a traditional IRA could potentially be tax deductible to your child, so there should be no current tax on that amount.  We however, typically recommend opening a ROTH IRA.  Although ROTH contributions are not deductible, this type of account can provide your child with years of tax-free earnings growth and distributions in retirement will not be taxable to them.  For more information on opening a ROTH for your child, see Danny Osborne’s article, “Retirement Planning… For Your Children.”

Stephen Osborne
Accountant
sosborne@mo-cpa.com

The new Employment Eligibility Verification form was released this past March and is now two pages.  The instructions are lengthier and there are new fields in Section 1 (email address, phone number, etc).

It would be wise for employers to review their files and have employees complete the latest edition of this form.

Form I-9 (with instructions) for download (English)
Handbook for Employers, Guidance for Completing Form I-9

Have questions?  As always, we’re a phone call away.

Lisa Osborne
Office Administration
lisaosborne@mo-cpa.com

If a taxpayer’s quarterly estimated tax payments equal at least 90% of their tax liability for 2013, the underpayment penalty will generally not apply.  An alternative way to determine a taxpayer’s estimated taxes for 2013, would be to take a look at the tax liability from 2012.

There are two ways to utilize this method:

1. Pay 100% of the tax shown on the taxpayer’s 2012 return if the adjusted gross income (AGI) was less than $150,000 ($75,000 if married filing separately); or
2. Pay 110% of the tax shown on the taxpayer’s 2012 return if the AGI was $150,000 or more ($75,000 if married filing separately).

What we highly recommend is taking the time now to review your current tax situation.  A mid-year tax projection gives a more concise picture of where the taxpayer stands with not only their tax liability, but may shed some light on ways for the taxpayer to decrease their overall taxes for the year.

Do you have questions about making estimated payments or your current tax situation?  Contact us and we’d be happy to offer our guidance and services to help ease your mind.

Lisa Osborne
Office Administration
lisaosborne@mo-cpa.com

Don’t forget to celebrate your mother this weekend… Sunday, May 12 is Mother’s Day!!